Wednesday, 17 March 2010

Thinking about Government

A recent Facebook post on Cypriot agricultural subsidies prompted an interesting exchange of views between various friends on the role of government. I was impressed to receive responses which did not respond to the specific example given, but to the theoretical virtues of government. Since this issue set off so much debate, I’d like to add a first stab at a more coherent personal view of how I feel about the role of government, in theory and in practice.

Strengths / Necessities

The role of government should be to provide an objective service, usually of last resort, that is fair and which cannot be fulfilled with the same conditions by a private sector or NGO provider. Some domains, such as defence, law enforcement, the law itself, regulation of business sectors, protection of the environment and natural heritage, and international relations at the national and super-national level are clearly those of government.

These roles are also justifiable on the basis of efficiency and effectiveness. It is often better, for instance, to have a national police force, given the common nature of the law (and of human nature), rather than a series of regional or private police forces, providing of course this national force is honest, flexible and adaptable.

Risks / Weaknesses

The main risk is that governments are neither intelligent, nor responsive or flexible, and do not adapt quickly to changing conditions. One a precedent is set (e.g. a subsidy granted), it become very difficult to unwind that precedent due to changing business conditions. The European Union’s Common Agricultural Policy (CAP) or the subsidies offered to various businesses, are cases in points, especially when these create a dependency culture.

The second major risk is that government over-extends its role. Fortunately or unfortunately, the government cannot do everything, yet the standard impetus of internal decision-making (which our ministers often call “policy-making”) is precisely for government to do too much, particularly since this reflects on the personal prestige of political leaders and parties. The result is “mission creep”:situation where government organizations miraculously find more and more things to do, dominate a given sector, and strangle or suffocate all other alternatives.

Government and Political Parties

One of the main points of the recent discussion was the theoretical role of governments. In general, it’s easier to agree on the theory, than on the practice. Yet we live in a real world, where countless millions of consumers, business managers, government employees and others make millions of decisions. We also live in a world where, for Europeans at least, we claim to be a democracy, but the structure both of political decision-making, and political parties themselves, is fundamentally undemocratic and rigid. Political parties are characterized by a strange permanence of “elected” leaders, while democracies are characterized by a strange inability of their citizens to influence important political decisions, after an election has taken place.

The Athenian ideal of democracy (which was hardly a broad or stable democratic franchise) was quite different from the current national interpretation. Today in Europe, we have national or regional elections, in which we mostly elect long-serving career politicians. But we have no influence over specific decisions. In the Athenian democracy, the electors voted not only for an administration, but for specific decisions as well. (This comment is not meant to praise Athenian democracy—it merely compares two systems).

Look at any European political party, and what will you see? Long-serving, career politicians who rarely face any personal responsibility for decisions made in office. This is arguably one of the major shortcomings of our current political system, since it creates a culture of impunity in which there are few real consequences for the political elite.

Government and Individual Politicians

Which leads us to another dilemma: are we sure that individual politicians are governing in the interest of the law, and of the country, or for their own narrower benefit? In the case of the United States, we see many examples of special interest lobbying which clearly contradict the greater interest, or the greater public good. In Greece, we see open examples of personal enrichment and corruption, which are unpunished by the law.

When speaking of the role of government, we should differentiate between theory and practice, where the practice is rarely as immaculate as the theory.

Government and Moral Hazard

If we are really in favour of equal opportunities and social equity, then we must answer the fundamental question on whether public money is really well spent. It’s far too easy to justify public spending as a benefit for “the poor” or “the disadvantaged”, particularly if this spending is the result of a government monopoly which restricts or removes any alternatives.

Given that the financial resources for government activities are ultimately derived largely from tax contributions of corporate and individual taxpayer citizens, it is not a moral imperative that services of the public good should be delivered solely by the public sector.

There are many sectors in Europe, for instance education and healthcare, where the government monopoly of provision through public sector providers has lessened the impact and efficiency of the resources invested, rather than improved them. This cannot continue, unless we use a different moral standard to judge a government organisation than a private one.

A Generalisation of Opposing Viewpoints

I like to think as government as the plumbing. Plumbing silently and humbly serves the vital functions of a house and the family that lives in it. When the plumbing breaks, it’s a crisis, and I can in a plumber to repair it, usually at low cost.

Our politicians, unfortunately, have a very different view of themselves. They tend to see themselves as protean heroes in the struggle of good versus evil. (Read any election campaign speech, and you will see what I mean) They rarely question the limits of their remit: once elected, they are free to roam at will, becoming increasingly arrogant and ubiquitous in the media. To justify their existence, it often seems that they must create a role for themselves, even if no role is really needed.

Obviously, I exaggerate: the functions of government are far more complex than that of a plumbing system. How can we connect the two viewpoints: those of the individual taxpayer, who wants a decent service at a fair tax and no poncing about, with the elected decision-makers who actually run government to further their political and individual careers?

Judging the Cost of Government

How can we tell government has over-extended itself? Usually when it has surpassed the financial limits in a political struggle to deliver higher public services or benefits. And this is what we see today. We have a society in which we, the taxpayers/citizens, have grown to expect the theory of public goods in healthcare, education, etc. but appear less willing to pay the price for them. Certainly, judging in terms of quality delivered, it would also appear that even now, we are paying too much for what is offered (at least from our viewpoint of public services in Greece and Cyprus).

The solution, from my viewpoint, is not to mindlessly extend the role of government as it is currently practiced, but to restrict and/or replace it, or at least the administrative elements of it. There is no reason, for instance, why more administrative functions interacting with citizens could not be placed online. There is no reason why at a certain point, a government should quite simply say “no” in terms of deciding a public investment.

We cannot continue the public spending track most countries are on. It will be necessary to adapt cuts in public spending, which have to be undertaken on a far better, economically rational basis than is currently the case. Implicit in this reduction of government expenditure is a restructuring of the public sector workforce and fixed positions. Do we really need, for instance, a Commissioner for Fisheries? Do we really need a Minister for Culture?

No Taxation without Representation

If we are going to view companies as legal organisms which will be taxed and regulated, then I suggest it is only fair that these entities are also given a voice in political decision-making. I do not recommend giving companies a vote, although this might make for an interesting simulation on a political theory class. But clearly, the role and energy of the corporate sector remains largely unused as a means of delivering a public good, since most companies are seen as passive respondents to the law, or to public policy. Yet the move towards “Corporate Social Responsibility” indicates that among many companies, there is a genuine interest in supporting key areas of public good: environment, charity work, education.

At the same time, other key issues have to be resolved:

·Why do most governments derive fewer taxes from companies than from individuals?

·Why do companies use lobbyists and “public affairs” consultants to pass favourable legislation?

·How can the system of “social partnership” work in practice?

The same principle applies to individuals: If we expect individual compliance with the law, or with a policy, it is only fair to allow individuals to influence the decision. Until now, such consultations are usually toothless exercises: in the future, a visionary democracy may separate, or re-define, the role of (a) elected politicians, (b) the permanent civil service, and (c) active citizens in decision-making and policy.

Certainly, my perception is coloured by my experience in Greece, Cyprus, France, Germany, the United States, and other countries where I have lived and worked. Many of these are hardly ideal as examples in various respects. Yet I hardly feel that, given the growing crisis in key areas such as public finance, education, pension systems, demography and economic competitiveness, we are moving in the right direction.

In fact, I believe the opposite is happening. We have constructed an elaborate experiment in social democracy in Europe after the end of World War II in 1945, which is not sustainable for the next 65 years. Because few politicians or citizens are willing to analyse the status quo on an objective basis, there is little incentive to consider alternatives.

As a result, we are being led into a situation where we will be forced to make changes, responding to symptoms rather than root causes of problems. And as such, we are making, and will continue to make, the wrong decisions.

I do not recommend the privatisation of society; nor do I have any fixed answer to many of the issues I have raised. So, if you do respond to this post, please do me the courtesy of an objective response, rather than ascribing to me a hidden agenda.

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